Investing Guidelines: Management Tenets 99fifteenfold. These f irms were headed by hard-working individuals with
very high IQs, all of whom had an intense desire to succeed. Buffett
paused; his eyes scanned the room. “You think about that,” he said
sternly. “How could they get a result like that? I’ll tell you how,” he
said, “mindless imitation of their peers.”^18
Coca-Cola
When Goizueta took over Coca-Cola, one of his f irst moves was to
jettison the unrelated businesses that the previous CEO had developed
and return the company to its core business, selling syrup. It was a
clear demonstration of Coca-Cola’s ability to resist the institutional
imperative.
Reducing the company to a single-product business was undeniably a
bold move. What made Goizueta’s strategy even more remarkable was
his willingness to take this action at a time when others in the industry
were doing the exact opposite. Several leading beverage companies were
investing their prof its in other unrelated businesses. Anheuser-Busch
used the prof its from its beer business to invest in theme parks. Brown-
Forman, a producer and distributor of wine and spirits, invested its prof-
its in china, crystal, silver, and luggage businesses, all of them with much
lower returns. Seagram Company, Ltd., a global spirits and wine busi-
ness, bought Universal Studios. Pepsi, Coca-Cola’s chief beverage rival,
bought snack businesses ( Frito-Lay) and restaurants including Taco Bell,
Kentucky Fried Chicken, and Pizza Hut.
Not only did Goizueta’s action focus the company’s attention on its
largest and most important product, but it worked to reallocate the
company’s resources into its most prof itable business. Since the eco-
nomic returns of selling syrup far outweighed the economic returns of
the other businesses, the company was now reinvesting its prof its in its
highest-returning business.
Clayton Homes
In an industry that is strangled by problems of its own making, Clayton
stands out for its strong management and smart business model.
Manufactured homes now constitute 15 percent of the total housing
units in the United States. In many respects, their historically negative